How a prompt payment discount works
A prompt payment discount is only earned if the customer pays early. See what the invoice shows and what is recorded.
Task 1A discount for paying early4 questions
A prompt payment discount is offered to a customer for paying early. It is also called a settlement discount.
Larkfield's invoice 3110 to Juniper Gifts has a net total of £800. Its terms are: 5% discount for payment within 10 days, otherwise pay in 30 days.
When the invoice is raised, nobody knows if the customer will pay early. So the invoice shows the full amount, with VAT on the full amount.
Task 2When the customer pays early2 questions
Task 3Recording the discount3 questions